How to Ride Out a Recession as a Small Business Owner

If you’re a small business owner, you might panic at the first whiff of the word “recession.” When faced with economic uncertainty, it’s all too easy to spiral into doom and gloom and a “batten down the hatches” mentality, but this could result in more harm than good for your business.

So, before you resort to cancelling all marketing spend, laying off your staff, or just throwing your hands up and shouting “woe is me” into the wind, let’s take a moment to clear our heads and look forward objectively.

Remember, a recession is a moment in time. How you choose to react may determine how well you weather the storm.

10 Tips to Help Your Small Business Successfully Ride Out a Recession

1. Build & Maintain Connection with Your Customers

If you aren’t already investing time and energy into building connections with your audience, now is the time to start. Social media, email marketing, your website, and customer service all effect the experience that customers have with your brand and products. In times of economic uncertainty, brand loyalty and customer experience are essential. Focus on growing or maintaining efforts related to social media, building and growing your brand newsletter, and ensuring every step of the customer experience (including your website experience) enhances the connection between you and your human audience.

2. Dig into Your Company Branding, Message and Values

The fact is, when money is tight, people will naturally tend to switch to cheaper alternatives. It gets harder to do this if there’s an attachment, especially if it’s to a small business you care about. Honing your brand messages and highlighting your values during a recession can enhance brand loyalty and even build new connections with your target audience. As an added bonus, clarifying your brand values and messaging may improve employee satisfaction and engagement with your company during a time when they may be experiencing stress or worry.

3. Reduce Unnecessary Expenses

When the first signs of economic downturn appear on the horizon, it’s time to take a hard look at your business expenses and decide where you can cut back to reduce outgoing costs. Be careful though. While it’s tempting to simply cut as much as possible in one broad sweep, clearcutting may not be the best solution. Look for costs that are easy to reduce (like subscription services you don’t need) and avoid making large purchases at this time. Are you able to re-negotiate your lease or give up a rental office space? If you’re not already remote, is your team able to work from home? Anything you can do to reasonably reduce your business expenses will help with your overall cash flow.

4. Keep an Eye on Your Cash Flow

During a recession, it’s important to be extra diligent in monitoring your cash flow. With inflation, costs will be higher, and revenue will be lower. Balancing the two will often make you feel like a tight-rope walker. Try to look at where you are now and forecast into the future to anticipate potential cash-flow issues. If you have savings, these will help you through challenging weeks or months. While it’s tempting to try to pay off your debts due to high interest rates, during a recession it can be more beneficial to carefully use and manage your credit, as it can provide some safety netting.

5. Get Creative!

A recession is a perfect time to think a bit differently about how you approach your customers and your business as a whole. During the pandemic lockdowns, many brick-and-mortar businesses began offering curbside pickup, home delivery, and created new online stores. These quick shifts helped many restaurants and stores adapt and survive. Check out emerging trends and see if your business can take advantage of them. Targeting different cities or markets may also yield new opportunities that you may not have thought of.

6. Sell to Existing Customers

It may be tempting to focus only on acquiring new customers, but your existing customers are more likely to continue to buy from you, especially if they have bought into your brand values. In addition to investing in building long-term relationships with existing customers, look for new ways to sell or enhance your offerings to them. This could be a wonderful time to ask your customers for feedback. Maybe there’s something they’d love to buy from you that you aren’t selling yet. Get creative! You never know what you might discover.

7. Play to Your Strengths

As a small business, what do you excel at? What do your customers love about you? What makes your team excited? Knowing these things about your business can help you come out on top. If your company is amazing at customer service, focus on that. If your company makes the best cupcakes in the city, hype that up! Highlight it on social media and in newsletters. Talk about and demonstrate your strengths when interacting with colleagues. Playing to your strengths doesn’t have to mean playing it safe. There may be something you are good at that you can do more of or leverage differently to help build your business. Look for those opportunities.

8. Being Willing to Pivot or Diversify

You might have a very niche or specific business offering. Surviving a recession may require some quick thinking and possible diversification of your products or services. The good thing is recessions often inspire innovative ideas. Think about your core business values and offerings and look for areas you can expand your products or even diversify. Is there a new or complementary product or service you can offer? Remember you can always ask your existing, loyal customers for feedback, as they may have ideas that you may not think of on your own.

9. Remember that Marketing Is More Than Advertising

During a recession, it can be tempting to pull back on all marketing spend. While in some cases, pausing ads and reducing spending may be necessary, it’s important to remember that for most businesses, marketing is still vital to sales success. Having said that, marketing isn’t just advertising. Marketing can include social media posts, blogging, attending networking events, sending email newsletters, offering bundles or seasonal sales, or even just getting out and talking about your product to pedestrians outside your brick-and-mortar store. It’s important to continue to invest in marketing, even if that investment is more guerrilla-style during a recession. As far as ads, if you do have the ability to keep spending on digital advertising, keep doing so – if other companies are pulling back, bidding costs may go down and you may find yourself coming out ahead of your competitors.

10. Invest In Mental Health

Financial uncertainty is stressful. There’s no getting around the fact that recessions provoke fear, worry, panic and loads of stress for small business owners and their employees. If you’re going to ride this out well, you and your team will need to take care of your mental health. This is not the time to cut back on mental health tools or strategies. Anything you can do to support your team and encourage open conversation, will go a long way to helping your employees feel valued, involved, and empowered. Practice meditation, exercise regularly, and ensure you have a supportive person to talk to (like a counsellor or trusted friend).

It is possible to ride out a recession as a small business. If you can pivot as needed, get creative, and stay optimistic during times of uncertainty, it's highly likely that you will make it through successfully... and (who knows), you may even come out on top! Whatever you do, don’t panic. You can do this.